[…] Instead of buying and installing solar panels on your home or property, you subscribe to a piece of a large local solar project nearby, often along with a few dozen to a few hundred other people who live in the area.
A portion of the electricity generated by these projects gets credited directly to your utility bill, you get a discount on electricity, and you don’t have to pay anything to join.
Community solar allows households to receive the benefits of solar energy without the cost or hassle of a rooftop installation. Roughly half of residences in the U.S. can’t host a solar installation because the occupants don’t own the property, or the roof is too old, too shady, or faces the wrong way for optimal sun exposure. Community solar eliminates these issues, making solar power more accessible to more people than ever before.
Residential electricity rates are typically comprised of two basic parts — a volumetric charge based on energy used and a monthly fixed charge, which is typically referred to as a customer charge. Customer charges are flat fees that every customer pays, regardless of the amount of electricity or gas used. Because utilities have a fixed revenue requirement, higher customer charges lead to lower volumetric charges, and vice versa.
Over the past several years, utilities across the country have pushed for higher customer charges, in part because they provide a guaranteed revenue stream. Acadia Center has developed materials showing that fixed charges for residential electric customers in most states typically range from $5 to $10 a month, but are much higher in New York, averaging close to $18. Central Hudson Gas and Electric’s current customer charge of $24 is the highest in New York and among the highest in the nation.
Why lower customer charges?
High customer charges disproportionately impact low-income customers, who typically use lower than average amounts of electricity and who are often forced to spend significant amounts of their income on utility bills. While high customer charges might represent only a small fraction of a bill for higher-income consumers, these charges can represent a large portion of a low-income consumer’s bill, making energy costs proportionately greater for those on whom the burden is already greatest.
High customer charges conflict with New York’s goals for a clean, modern, consumer-friendly electric system by decreasing incentives for customers to lower their electricity bills by investing in energy efficiency or distributed energy resources like solar power.
High customer charges don’t align with state goals
Importantly, high customer charges reduce the incentive for investment in energy efficiency. This is problematic as New York seeks to ramp up its efforts to improve statewide energy efficiency by announcing a plan to set a 2025 energy efficiency target by Earth Day. As Acadia Center has pointed out in its recently released EnergyVision2030 Progress Report for New York, New York’s electric energy efficiency annual savings level is only 0.5%, compared to savings levels of 3.24% in leading states such as Massachusetts. As New York seeks to establish ambitious energy efficiency targets, it needs to set the right incentives to invest in these resources by ensuring that utilities reduce these charges.
Working toward rate relief
Things may be starting to change. On April 18, thanks in part to Acadia Center’s advocacy, Central Hudson Gas and Electric agreed to reduce its current electric and gas residential customer charge to $19.50 over three years in its ongoing rate proceeding, becoming the first New York utility to reduce its customer charge in more than a decade.
Acadia Center has set up a website with several other organizations at www.lowerfixedcharges.org to continue advocating for lowering customer charges to levels that provide rate relief to New York energy consumers and set New York on a path to meet its clean energy and energy efficiency goals.
Since 2014, New York has been pursuing ambitious reforms to its energy system. Collectively called Reforming the Energy Vision or “REV,” this process has propelled New York to a position of regional and national leadership. REV has put New York on a path to modernizing its electric grid, dramatically increasing renewable energy sources and giving consumers more control over their energy use and costs. With these cutting-edge goals, New Yorkers are right to think that the state is poised for an exciting clean energy future.
However, New York cannot hope to achieve its goals for consumers, energy efficiency, and clean energy if it doesn’t confront a stubborn problem: how to reform the outdated ways consumers pay for electricity.
One immediate opportunity is to reform the use of high fixed monthly charges collected by utilities. Also referred to as basic service charges or customer charges, these fixed charges are flat fees that every customer pays, regardless of the amount of electricity she uses. Across the country, fixed charges for residential customers typically range from $5 to $10 a month, but in some states — notably New York — these charges are significantly higher.
New York’s fixed charges are actually some of the highest in the nation. Acadia Center found that current average residential customer charges for major investor-owned utilities in New York range from $15.92 to $24 per month, higher than all neighboring states. National Grid has a residential fixed charge of $17 in New York, but only $5 in Rhode Island and $5.50 in Massachusetts. Central Hudson’s is even higher — $24, which it is seeking to increase to $25. Remarkably, New York’s fixed charges are higher than those in Wisconsin, a state that has been widely criticized for approving large fixed charge increases since 2014.
High fixed charges conflict with REV’s goals for a clean, modern, consumer-friendly electric system. They give customers less opportunity to lower their electricity bills by using less energy. This reduces the incentive to invest in energy efficiency and technologies like solar power. With less incentive to save energy, customers also tend to increase their electricity use, requiring utilities to spend more money to keep the lights on. Energy efficiency makes it easier for New York to meet its strong commitments to clean energy. When high fixed charges hinder new efficiency investments, they imperil those commitments.
High fixed charges also disproportionately burden low-income customers — directly contradicting goals for a modern, equitable energy system. Low-income consumers typically use less electricity than average, so they generally benefit from lower fixed charges. While a high fixed charge might still represent only a small fraction of a bill for higher-income consumers, these charges can represent a large portion of a low-income consumer’s bill, making energy costs proportionately greater for those on whom the burden is already greatest. New York needs electricity pricing that works to alleviate this injustice, not exacerbate it.
Connecticut, like New York, has high fixed charges, but with action from a broad coalition of consumers, labor and clean energy advocates, it has begun the process of reform. In late 2016, the residential customer charge for The United Illuminating Company, the smaller of Connecticut’s two utilities, was reduced from $17.25 to $9.67 per month. An upcoming rate case is likely to reduce the residential fixed charge of Eversource Energy, Connecticut’s larger utility.
New York should follow suit. While New York’s Public Service Commission should be commended for rejecting proposed increases in fixed charges since 2015, the PSC needs to take the next step and begin reducing utilities’ already too high fixed charges. In National Grid’s current rate case, the utility has proposed to keep its customer charge at $17. Acadia Center has filed expert testimony in that proceeding stating that a reasonable range for customer charges would be between $5.57 and $8.30.
A reduction to this range has broad and deep support. Recently, 52 organizations released joint principles in favor of reforming and lowering residential fixed charges in New York. Policymakers should take up this strong call to ease energy bill burdens for consumers and help ensure that REV’s ambitious reforms will succeed and benefit everyone.
Cullen Howe is New York state director and senior attorney at Acadia Center, a non-profit regional research and advocacy organization committed to advancing the clean energy future.
This op-ed was published in the Albany Times Unionhere.
New York, N.Y. — Today, Acadia Center, Alliance for a Green Economy, Natural Resources Defense Council, Vote Solar, and 41 other organizations joined to support a common set of principles to address one of New York’s most regressive charges for utility service: the unavoidable monthly fee that all residential customers must pay regardless of the amount of electricity consumed. “Joint Principles on Residential Fixed Charges in New York” calls on New York utility regulators to lower these inefficient and regressive rates. The 45 organizations come from many different perspectives, including low-income and consumer advocates, environmental and clean energy public interest organizations, solar advocates, and clean energy industry groups, and span national organizations as well as community organizations across New York.
“In order to achieve a cleaner, more modern and consumer friendly energy system, New York needs to reform and lower fixed charges. The current regressive approach was adopted in the 1990s and places barriers in the way of consumer adoption of modern technologies like solar and energy efficiency” said Daniel Sosland, president of Acadia Center, which has successfully advocated for lower residential fixed charges in Connecticut. “The diverse array of groups who have endorsed lowering fixed charges show that this would be a win for ratepayers, clean energy, and communities across New York.”
New York has very high fixed customer charges compared to other states. For example, National Grid has a residential fixed charge of $17 in New York, but only $5 in Rhode Island and $5.50 in Massachusetts. Central Hudson has even higher fixed charges at $24, which it is seeking to increase to $25, as well as an additional tiered “service size charge” for many customers. Acadia Center found that current average residential customer charges for major investor-owned utilities are higher in New York than all of its neighboring states. New York’s fixed charges are even higher than Wisconsin, a state that has been widely criticized for approving large fixed charge increases since 2014.
Mark LeBel, Attorney and Associate Director of Acadia Center’s Grid Modernization and Utility Reform Initiative, said: “Most states across the country use a definition for residential fixed charges that is much narrower than New York’s approach. Our testimony in the National Grid rate case demonstrated that residential fixed charges are currently far too high and that reform would benefit the majority of residential ratepayers. Large consumers would pay more, but 61% of monthly bills would go down with lower residential fixed charges.”
“We see no reason why utility customers in New York should be paying fixed charges that are three times higher than those paid to the same company by customers in other states,” said Jessica Azulay, program director of Alliance for a Green Economy. “It’s high time to reduce these charges so that low-income customers, low energy users, and people who want to invest in energy efficiency and renewables are no longer overburdened with these regressive and unfair costs.”
“High unavoidable charges on electricity bills have a disproportionate impact on lower income customers who use less energy and decrease the incentive for customers to make energy efficiency improvements or invest in clean energy through actions like participating in a community solar project or installing solar panels,” said Miles Farmer, a Clean Energy Attorney at Natural Resources Defense Council. “New York utilities should reduce fixed charges and instead focus on designing rates that empower customers.”
“Vote Solar is proud to stand with dozens of organizations working for customer rights, community health, environmental justice and clean energy progress in the call for lower fixed charges,” said Nathan Phelps, program manager of DG regulatory policy at Vote Solar. “In order for New York to succeed in its ambitious and laudable clean energy vision, it must empower families and businesses to take control of their own electric bills. Lowering fixed charges is a critical step to achieving that vision.”
Cullen Howe, Acadia Center’s New York Director, noted, “Acadia Center supports the overall vision that has been laid out by the Public Service Commission and Cuomo Administration over the last several years. Lower residential fixed charges will help enable the goals of Reforming the Energy Vision, including increased energy efficiency and vibrant markets for clean energy.”
It is an exciting time for clean energy issues in New York. New York’s ongoing Reforming the Energy Vision (REV) proceeding, its goal of 50% renewable energy by 2030, and its continued participation in the Regional Greenhouse Gas Initiative provide key elements for the future of the state’s energy system. Acadia Center’s recently completed report, EnergyVision 2030, shows that New York can reduce emissions 45% and be on a path to a clean energy system by the year 2030 if the state acts now to further strengthen its commitment to clean energy technologies. To facilitate the action necessary to achieve this vision for all New Yorkers, Acadia Center has taken the next step, strengthening its staffing capacity in New York and hiring a full-time staff director of its New York program.
Acadia Center has been active on selected issues in the state for several years, participating with colleague organizations in the Regional Greenhouse Gas Initiative and other energy and climate issues. New York’s REV process—one of the most comprehensive reassessments of energy policy occurring in the country—has offered opportunities for Acadia Center’s experience in energy policy, energy efficiency and climate mitigation to be applied in New York forums. Fully active in the many REV proceedings, Acadia Center has focused on energy efficiency, power grid modernization, and climate policy. In 2015, by invitation of the Rockefeller Brothers Fund, Acadia Center hosted a multiday meeting at the Pocantico Conference Center focusing on utility reform and grid modernization issues. Beginning in 2015, the organization helped to protect the integrity of New York’s new Clean Energy Standard by successfully arguing against counting large hydropower as a renewable resource eligible for ratepayer support. In addition, it participated in the settlement phases of Con Edison’s most recent rate case and successfully advocated for the utility to increase its investments in energy efficiency.
This past July, this work ramped up when Acadia Center hired me as Senior Attorney as its inaugural New York Director, joining Acadia Center’s New York project team of lawyers and energy policy experts. I’ve joined the team at an exciting moment for the organization and the state. I came to Acadia Center from the New York City Council, where I had been a legislative counsel and was responsible for drafting and negotiating a wide variety of legislation focused on energy efficiency, clean energy, and sustainability. Before that I was an environmental law specialist at Arnold & Porter Kaye Scholer’s New York City office, where I focused on federal and state environmental issues involving climate change, energy efficiency, and green buildings. My work at Acadia Center largely focuses on policies that I’ve been working on throughout my career—policies that move us toward a future fueled by clean energy and energy efficiency.
One of my first tasks has been representing Acadia Center in a rate case brought by National Grid. The utility is seeking to increase customer rates by $331 million beginning next year. Acadia Center has focused on National Grid’s high fixed customer charges, which are charges all customers pay regardless of the amount of electricity they use. In most states, fixed charges range between $5 and $10 a month for residential customers, but in some states, including New York, these charges are much higher.
Since I started in the role of director, Acadia Center has released a paper explaining the problems with high utility fixed charges, which detrimentally impact consumer incentives to invest in energy efficiency and solar power, and the organization has filed testimony in the rate case stating that a reasonable range for customer charges would be between $5.57 and $8.30. We have also focused outreach efforts on educating consumers about the issue of high fixed charges and about opportunities to make their voices heard. This work will continue as Acadia Center expands its reach in New York, advocating for sustainable solutions across the energy system.
NEW YORK — The Public Service Commission (PSC) issued an important Implementation Order on September 14, 2017, in the Value of Distributed Energy Resources (VDER) proceeding (Case 15-E-0751). Unfortunately, this order will impede the advancement of solar energy in New York and impose unnecessary barriers on the ability of consumers, businesses and communities to benefit from this clean energy resource. The structure laid out by the PSC in March of 2017 promised to reform and update New York’s approach to valuing solar energy and expanding consumer solar markets. The Order undermines the new VDER net metering structure because it undervalues distributed resources on the basis of unvetted utility studies that minimize solar’s economic value. In doing so, the Commission’s Order conflicts with the distributed energy future envisioned by New York’s historic and ambitious Reforming the Energy Vision (REV) future.
“The promise of a modern energy system that allows clean energy to flourish depends upon a fair determination of the economic value of solar and other clean energy resources,” said Daniel Sosland, president of Acadia Center, which has provided detailed comments on solar values in the PSC case. “Defining solar power’s economic future solely on information provided by electric utilities, who want to tilt the playing field towards investments that benefit the utility and its shareholders, is not a formula for short-term or long-term success.”
Mark LeBel, Associate Director of Acadia Center’s Grid Modernization Initiative, said, “The Commission has made a major mistake by approving unvetted marginal cost of service studies from Central Hudson, NYSEG and RGE. These studies all improperly limited the potential values provided by distributed energy resources. In addition, Central Hudson used a new and untested methodology that has never been put forward before in an adjudicated proceeding, and the Commission failed to address several detailed critiques brought forward by Acadia Center and other parties.”
Cullen Howe, Acadia Center’s New York Director, noted, “Acadia Center supports the overall vision that has been laid out by the Commission and the Cuomo Administration over the last several years. However, implementation of this vision cannot ignore the details and the practical realities of how to animate markets for energy efficiency and clean energy.”